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The Curious Case of Missing Global Productivity Growth

70 points by bootload 10y ago

davidf18 10y ago
At least in the US, purchasing power has declined with many for two factors: 1. Rising health care costs now 18% of GDP at over $3.2 trillion. As firms spend more on insurance, there is depressed wage growth, while direct employee contributions (some premiums, larger deductibles, co-pays) have been increasing. 2. In cities such as NYC (where I live), Boston, DC, SF, LA, ...there is rent-seeking in the real-estate market through zoning density restrictions causing market inefficiencies that increase the cost of housing far higher than in a functioning, efficient market. Harvard Economist Edward Glaeser has written about this in the context of affordable housing in NYC, in the article, Build Big Bill [DeBlasio, NYC Mayor] [1] 3. There are other cases of rent-seeking throughout the economy as well as other market inefficiencies through negative externalities and information asymmetry. Reasons why healthcare in the US is so expensive is negative externalities of smokers, air pollution, not paying their way for additional healthcare costs and information asymmetry where doctors have much more information than patients and patients may have much ore information than insurers related to medical conditions. [1]http://www.nydailynews.com/opinion/build-big-bill-article-1.1913739 http://www.nydailynews.com/opinion/build-big-bill-article-1....
cik2e 10y ago
What are the incentives for workers to be more productive? Compensation tied to their productivity of course. As long as people are working on fixed salaries without significant equity, you can bet your ass that we're going to have "missing" productivity.
Nomentatus 10y ago
Of course, some important kinds of productivity aren't measured at all, or just barely. If I buy a video game today, its virtual territory is much bigger and more detailed than a decade ago, but that increase isn't reflected in economic statistics. Nor better resolution on TV, etc, etc. What's easiest to measure is whatever is most obsolete or traditional, which is to say, whatever isn't keeping up with the times. I'm not saying there aren't other losses, however. Years where wages went up by 4% in the U.S. were common until Reagan took office; they've never happened in all the time since - in fact raises of 2% are rare now. I wonder whether goods becoming more durable in general is an influence. Cars last a lot longer now than when I was young, but they aren't as easy to make. It's easier to churn out shoddy goods than long-lived ones; as consumers insist on better quality, the "same" item takes longer to make.
CyberDildonics 10y ago
Is education getting better or more accessible?
pm90 10y ago
tl, dr: The rate of productivity growth is slowing down and the authors don't know why, they speculate that the IT revolution has not yet achieved the same level of productivity gains as offered by light bulb/cars etc.
- freehunter 10y ago
  A problem I can see with productivity gained by automation is, humans are clever. They can come up with novel answers to their issues and work faster. But once it's automated, the computer/robot isn't going to automate its job any more. It won't come up with clever or novel solutions. Humans could make those computers/robots better, but only if there is a pressing need. Robots that build cars will get better because the company that builds them wants to sell factories a new model. But if I'm replaced by an Excel macro, no one is trying to sell a new Excel macro. That task will stagnate.
  - pm90 10y ago
    Well, if the automation is good enough, it doesn't make (financial) sense to improve it. If its not, there will be other companies/teams that will come up with an automation that is better and that automation will be adopted. e.g. before Docker/Containers came along, tools like Chef/Puppet/Ansible were already automating much of infrastructure deployment/management. But a new paradigm was introduced which was (seemingly) better and that is catching on now.
- AnimalMuppet 10y ago
  But how, exactly, is productivity measured? In dollars of GDP produced per hour worked, right? The problem is that so much of what's being produced doesn't show up as dollars of GDP. Take Wikipedia, for example. Back in the day, a set of encyclopedias cost hundreds of dollars. Now Wikipedia is free (if you don't donate to them), and has more information. That produces value to a huge number of people. But how much does it show up in GDP? I suspect it shows up as zero dollars. Or take Linux. Or Google. Both of those contribute far more value than they earn in dollars. I suspect that there's a lot of that in the information sector - more value than GDP being produced. And this makes us "richer", not in dollar terms, but in terms of information and tools available for us to use.
eugenejen 10y ago
how about the possibility that the whole system's complexity outgrow our abilities to manage the system for the moment?
- brbrodude 10y ago
  Or maybe it is just flawed.
- deathhand 10y ago
  Capital expenditure drives productivity. Companies/individuals are holding onto that potential energy at unpreccedentaded levels. These are the seeds of revolutions and war and that's when the 'system' will correct itself.
  - drinkjuice 10y ago
    That sounds like one mighty crappy system though, considering the next set of global wars could spell the end of human civilization as we consider it worthwhile, so I came up with one I like better in 3 seconds: every 3 years, a random number between 0.001 and 1.0 gets generated for every person on the planet (no age restrictions), all those numbers get added and everybody gets their respective share of global wealth. Call it Fununism. It'd be the only argument you'd ever need to convince me to go totally cashless forever.
    - politician 10y ago
      If physical assets (land, gold bars) are not redistributed under Fununism, then what stops a new aggregation of wealth? Otherwise, how would you redistribute the assets? Gold bars can be shipped, but land ownership is difficult. For example, would a random illiterate from a developing nation be assigned ownership of a Manhattan skyscraper? One could imagine a system of guardianship in place to steward the property, but that system would enable a new aggregation of wealth through fees. It seems to me that your proposal would be an extremely efficient way for a small group of people to rapidly consolidate wealth.
tomasppl 10y ago
Economic growth is proportional to environmental destruction and pollution. People don't want to talk about that. To make something you're destroying something else. It's more of a trade than anything else. Given that, having no growth is great news.
- zzalpha 10y ago
  Given that, having no growth is great news. Uh, no. Productivity is a measure of the number of widgets you can make with X people and Y resources (the most common measure being GDP / hours worked). If you can make the same number of widgets with X/2 people, you've doubled productivity. Increased productivity doesn't strictly mean an increase in the number of widgets the world makes or the amount of resources the world consumes (in fact, increased productivity can be a result of increased efficiency, which would mean fewer resources consumed). As the article points out, increased productivity is going to be key in those places where the demographics project a declining working population. As an aside, the lack of productivity growth isn't exactly news. I've been seeing articles about this phenomenon for at least a few years as the numbers from the 2008 recovery started to firm up. I was hoping this article would add to the conversation, but it doesn't seem to have done so...
- JamesBarney 10y ago
  I don't think this theory has a lot of evidence for it. I'm not sure what needs to be destroyed to create Dishonored 2.
  - gipp 10y ago
    The parent is certainly oversimplifying, but you're not looking very carefully if you can't see environmental effects there. The energy expenses alone -- of the computers of developers, other staff of the company, and players; of whatever cloud resources are used by the company directly or through 3rd party services they take advantage of; of the office itself and of the transportation of employees to and from it -- are pretty huge. Not to mention the resources extracted to build the computers and other equipment used by the creators and consumers. They aren't used exclusively because of Dishonored 2, but it's an enormous ecological burden shared by all economic activity involving computers. You could keep going.
marcosdumay 10y ago
And notice that this ongoing decline in productivity is completely incompatible with that "the robots are taking all the jobs" line. What means, either that measurement is wrong, or current unemployment levels are not caused by automation. Of course, that does not mean that the robots won't take all the jobs on the near future. Just that they didn't do it already.
- tonyedgecombe 10y ago
  If automation pushes people out of high paying jobs into low paying jobs then it will result in lower productivity.
  - marcosdumay 10y ago
    In that case, the measurement is wrong. I didn't dig deep enough on it to make my mind, and there are plenty of reasons to think it's flawed.
- freehunter 10y ago
  Or that robots are taking jobs at the same rate humans are leaving the workforce. Baby boomers are retiring and automation is increasing, so if they're at the same rate, unemployment wouldn't necessarily go up. However the more likely answer is that the measurement is wrong.
  - zzalpha 10y ago
    Actually, in that case you'd still see an increase in productivity (e.g. GDP / hours worked) as workforce participation declines while GDP remains static.
- pierrebai 10y ago
  Another explanation is that robots are replacing low-paid jobs that were marginal cost in a product. I'd expect automating fabrication in the far-east (where wages are low) would fit this description. So the cost savings, and thus productivity gains, are marginal.
qwrusz 10y ago
A bit frustrating to see these outdated ideas and old ways of thinking continue to generate headlines. Total Factor Productivity (TFP) is a made-up best-guess legacy issue based on mathematical remainders/residuals/error terms from miscalculations of mis-measurements. Productivity and technology are real things and important, but they were appropriated incorrectly a long time ago and contemporary economics has moved on to try to be much more precise and careful in discussing such things. A similar, somewhat controversial example of a "distraction when math tries to becomes words" can be seen in the news when it comes to discrimination. Studies of sociodemographic differences and income levels, after controlling for education and IQ and experience etc., find differences in pay between men and women and between different minorities. The unexplained remainders for differences in income got called discrimination. Discrimination is a real thing and a real problem and must be addressed. But the reasons for differences in pay is not entirely due to discrimination, it's clearly much more complicated than that, studies that show this complexity are only recently getting attention. Lumping and labeling a problem as one big thing ("technology", "discrimination") that's easy to explain to a layperson but when it's really much more complex and the problem still largely misunderstood is a disservice to everyone.
- roymurdock 10y ago
  What's a better way to measure the impact of technological infrastructure on the economy than imputing TFP? Interested to hear how technology and productivity are discussed in state of the art economics, as I find TFP a very useful concept and measurement.
  - qwrusz 10y ago
    I'm not sure how to answer within the scope of this thread, but a short answer is: the better way to measure the impact of technology infrastructure on the economy is to measure the impact of technology infrastructure on the economy. How this works: Pick a technology, go study its real impact in the real world, repeat. TFP does not do that. It doesn't measure anything. TFP is a residual from theoretical economics, not empirics, often styled in a form of Y=AKL. We don't know how (or at least can't agree how) to measure K or L accurately, more importantly we don't even know what A is or what it contains. I am not surprised you find TFP useful. It's a Nobel Prize winning idea. And I respect the thinking behind it. But it has since been kindly debunked by the real world. Many people find prayer or homeopathic medicine useful and practice them daily, this doesn't mean those things are working how people think they are or at all. I don't mean to punt an answer here but Wikipedia explains the problems with TFP better than I. Follow the links through the Cambridge Critiques as a start: https://en.wikipedia.org/wiki/Total_factor_productivity https://en.wikipedia.org/wiki/Total_factor_productivity
nickbauman 10y ago
Anyone notice that the end of productivity gains correspond to the end of Moore's Law (at least at the singe core level)? Coincidence?
- sergiosgc 10y ago
  Moore's law has not ended (yet). Transistor count is still following an exponential curve.
  - nickbauman 10y ago
    True in theory the transistor count increases the performance, but in practice while the transistor count has increased, the performance has leveled off at around this time. https://www.lordabbett.com/content/dam/lordabbett/en/images/articles/chart2/CHART-Moore's%20Law%20on%20Trial%20Chart-11.11.2015.png https://www.lordabbett.com/content/dam/lordabbett/en/images/...
jwildeboer 10y ago
The amount of time wasted by humans trying to access paywalled articles might be quite a factor. #sarcasm
petra 10y ago
A layman's theory: First: total_factor_productivity = price_of_output/(0.7labor_cost + 0.3capital_cost) Let's say we're in a state of ideal competition - the minute some company improves productivity , which leads to reducing the input costs they put into the process by X% , other companies copy that process, which lead to the price going down by X%. And on the other hand, companies insulated from competition usually don't grow their productivity. So maybe the economy has many more of those 2 types of companies and that's mirrored in the economic statistics ?
philipkglass 10y ago
Naive question from someone who never took economics courses: Could some of the "missing" productivity come from measuring productivity in units of money instead of physical units? Sectors with highly competitive markets can rapidly increase real-product output but then see most of the dollar-gains erased by competition. For example, you could look at solar PV where last year the industry set a record of 70 gigawatts-peak of modules installed. The price competition is so fierce that manufacturer revenue has barely budged over 2012, when only ~30 GWp were installed, and actually declined from 2015. If an economist looks at this sector do they see spectacular productivity improvements like I see (far more watts, at lower prices, with real physical improvements up and down the supply chain), or do they consider productivity "missing" because the physical improvements aren't leading to revenue/profit growth? And if it's the latter, does that imply that economists only recognize productivity improvements when markets are imperfect enough that improved production technique delivers more money instead of fiercer competition? Is there no such thing as growing productivity (that would be recognized by mainstream economists) in a deflationary environment?
- oli5679 10y ago
  Productivity is measured in terms of a price index (the cost of a 'basket' of goods). There are some obvious challenges with defining this basket in practice, and it is plausible to argue that inflation is persistently overestimated and so actual productivity growth is higher than the reported figure. However, this could apply equally to previous time-periods. Just as modern generations benefit from superior electronics products and mobile network speeds, previous generations benefited from massive increases in the variety and freshness of food, or the household appliances that reduced the time cost of household chores. It could be that productivity growing at a rate that is both faster than measured but slower than trend? https://www.bls.gov/cpi/ https://www.bls.gov/cpi/
- edblarney 10y ago
  "rapidly increase real-product output but then see most of the dollar-gains erased by competition." What you mean to say is 'can we measure consumer surpluses' instead of 'producer surpluses' - i.e. profits. Indirectly - yes - this may be the root of the problem. When products improve in quantity and quality, but profits go down - we generally say the 'economy is shrinking'. But the value to consumer has gone up. We don't measure 'consumer surplus' i.e. the value captured by a consumer when they buy something. Essentially - you pay $1 for a pen. How much would that pen cost so that you felt 'it was not worth it'. Well, you might pay $100 for a pen, if you need to write sometime in your life. You'd probably treat it very well, but you'd still need to buy it. Maybe $500 is the real value of a pen. In this case - there is $499 'consumer surplus' every time a pen is bought for $1. (Again, not quite fair as you might buy several $1 pens whereas you'd only buy one for $500 - but you get the picture). The GDP is just the cost of everything sold in the economy + government spending. Which is a really bad measure if you think about it :)
Pamar 10y ago
I would like to add another possible way to interpret this. (caveat: I am suggesting stuff that I read in the blog of an Italian economist, I hope I am not misrepresenting him). What if Productivity was driven by demand? Do we "produce" stuff (or offer services) without any expectation to sell it to someone? If something is selling like hotcakes the producers of such item will do all they can to increase productivity, and competitors will try to create a similar product which either costs less or offers more features (or both) in order to capture the unfulfilled demand. Ok, assuming this is reasonable, what happens when demand, in general terms, starts to lag (due to a long economic stagnation/crisis)? (Another symptom that could help strenghten my argument: Hanjin built a large shipping fleet expecting to need it to ship stuff around and cope to increasing demand... and now: http://www.abc.net.au/news/2016-09-05/south-korean-shipping-collapse-leaves-freight-stranded/7814768 http://www.abc.net.au/news/2016-09-05/south-korean-shipping-... )
shae 10y ago
I'd argue we're still working for hours rather than accomplishments. I spent a few years self-employed, I would bid a money cost for an accomplishment based on how many hours it would require. If my bid was accepted, I was then immediately motivated to find a more efficient approach so I had more of both time and money. Every iteration of that approach improved my ability to accomplish tasks in smaller amounts of time.
rqebmm 10y ago
I'm not an economist, but one thing I've wondered is "how much productivity has been added since the 60s purely by adding women to the workforce"? Naively it would seem that almost doubling the available workforce would have large temporary effects on the economy until that became the norm. An alternative theory posed by one of my favorite economists[0] is that administration of public companies under the "maximize shareholder value" doctrine is finally coming home to roost. By prioritizing short-term profits in favor of long-term investment, companies have slowed their own growth for the last ~30 years. [0] http://www.goodreads.com/quotes/434485-running-the-company-for-the-shareholders-often-reduces-its-long-term http://www.goodreads.com/quotes/434485-running-the-company-f...
- AtomicOrbital 10y ago
  `by adding women to the workforce` the family is exposed to twice the chance of a breadwinner loosing their job, increased cost due to childcare/a 2nd car ... also both partners working too often results in greater appetite for debt - these risks are avoidable yet human nature tends otherwise
acegopher 10y ago
Globally there has been a lot of wage stagnation at the worker level. Anecdotally, a lot of folks in my social circle have traded working hours for salary. They used to work 50-60 hours for the same salary they are working 40 hours for now. Or perhaps there is less hope or belief that working hard will result in getting ahead. With most of the gains post-crisis going to the top and income inequality growing, perhaps there is less worker incentive to work hard.

70 points by bootload 10y ago

At least in the US, purchasing power has declined with many for two factors: 1. Rising health care costs now 18% of GDP at over $3.2 trillion. As firms spend more on insurance, there is depressed wage growth, while direct employee contributions (some premiums, larger deductibles, co-pays) have been increasing. 2. In cities such as NYC (where I live), Boston, DC, SF, LA, ...there is rent-seeking in the real-estate market through zoning density restrictions causing market inefficiencies that increase the cost of housing far higher than in a functioning, efficient market. Harvard Economist Edward Glaeser has written about this in the context of affordable housing in NYC, in the article, Build Big Bill [DeBlasio, NYC Mayor] [1] 3. There are other cases of rent-seeking throughout the economy as well as other market inefficiencies through negative externalities and information asymmetry. Reasons why healthcare in the US is so expensive is negative externalities of smokers, air pollution, not paying their way for additional healthcare costs and information asymmetry where doctors have much more information than patients and patients may have much ore information than insurers related to medical conditions. [1]http://www.nydailynews.com/opinion/build-big-bill-article-1.1913739 http://www.nydailynews.com/opinion/build-big-bill-article-1....

cik2e 10y ago

What are the incentives for workers to be more productive? Compensation tied to their productivity of course. As long as people are working on fixed salaries without significant equity, you can bet your ass that we're going to have "missing" productivity.

Nomentatus 10y ago

Of course, some important kinds of productivity aren't measured at all, or just barely. If I buy a video game today, its virtual territory is much bigger and more detailed than a decade ago, but that increase isn't reflected in economic statistics. Nor better resolution on TV, etc, etc. What's easiest to measure is whatever is most obsolete or traditional, which is to say, whatever isn't keeping up with the times. I'm not saying there aren't other losses, however. Years where wages went up by 4% in the U.S. were common until Reagan took office; they've never happened in all the time since - in fact raises of 2% are rare now. I wonder whether goods becoming more durable in general is an influence. Cars last a lot longer now than when I was young, but they aren't as easy to make. It's easier to churn out shoddy goods than long-lived ones; as consumers insist on better quality, the "same" item takes longer to make.

CyberDildonics 10y ago

Is education getting better or more accessible?

pm90 10y ago

tl, dr: The rate of productivity growth is slowing down and the authors don't know why, they speculate that the IT revolution has not yet achieved the same level of productivity gains as offered by light bulb/cars etc.

freehunter 10y ago
A problem I can see with productivity gained by automation is, humans are clever. They can come up with novel answers to their issues and work faster. But once it's automated, the computer/robot isn't going to automate its job any more. It won't come up with clever or novel solutions. Humans could make those computers/robots better, but only if there is a pressing need. Robots that build cars will get better because the company that builds them wants to sell factories a new model. But if I'm replaced by an Excel macro, no one is trying to sell a new Excel macro. That task will stagnate.
- pm90 10y ago
  Well, if the automation is good enough, it doesn't make (financial) sense to improve it. If its not, there will be other companies/teams that will come up with an automation that is better and that automation will be adopted. e.g. before Docker/Containers came along, tools like Chef/Puppet/Ansible were already automating much of infrastructure deployment/management. But a new paradigm was introduced which was (seemingly) better and that is catching on now.
AnimalMuppet 10y ago
But how, exactly, is productivity measured? In dollars of GDP produced per hour worked, right? The problem is that so much of what's being produced doesn't show up as dollars of GDP. Take Wikipedia, for example. Back in the day, a set of encyclopedias cost hundreds of dollars. Now Wikipedia is free (if you don't donate to them), and has more information. That produces value to a huge number of people. But how much does it show up in GDP? I suspect it shows up as zero dollars. Or take Linux. Or Google. Both of those contribute far more value than they earn in dollars. I suspect that there's a lot of that in the information sector - more value than GDP being produced. And this makes us "richer", not in dollar terms, but in terms of information and tools available for us to use.

eugenejen 10y ago

how about the possibility that the whole system's complexity outgrow our abilities to manage the system for the moment?

brbrodude 10y ago
Or maybe it is just flawed.
deathhand 10y ago
Capital expenditure drives productivity. Companies/individuals are holding onto that potential energy at unpreccedentaded levels. These are the seeds of revolutions and war and that's when the 'system' will correct itself.
- drinkjuice 10y ago
  That sounds like one mighty crappy system though, considering the next set of global wars could spell the end of human civilization as we consider it worthwhile, so I came up with one I like better in 3 seconds: every 3 years, a random number between 0.001 and 1.0 gets generated for every person on the planet (no age restrictions), all those numbers get added and everybody gets their respective share of global wealth. Call it Fununism. It'd be the only argument you'd ever need to convince me to go totally cashless forever.
  - politician 10y ago
    If physical assets (land, gold bars) are not redistributed under Fununism, then what stops a new aggregation of wealth? Otherwise, how would you redistribute the assets? Gold bars can be shipped, but land ownership is difficult. For example, would a random illiterate from a developing nation be assigned ownership of a Manhattan skyscraper? One could imagine a system of guardianship in place to steward the property, but that system would enable a new aggregation of wealth through fees. It seems to me that your proposal would be an extremely efficient way for a small group of people to rapidly consolidate wealth.

tomasppl 10y ago

Economic growth is proportional to environmental destruction and pollution. People don't want to talk about that. To make something you're destroying something else. It's more of a trade than anything else. Given that, having no growth is great news.

zzalpha 10y ago
Given that, having no growth is great news. Uh, no. Productivity is a measure of the number of widgets you can make with X people and Y resources (the most common measure being GDP / hours worked). If you can make the same number of widgets with X/2 people, you've doubled productivity. Increased productivity doesn't strictly mean an increase in the number of widgets the world makes or the amount of resources the world consumes (in fact, increased productivity can be a result of increased efficiency, which would mean fewer resources consumed). As the article points out, increased productivity is going to be key in those places where the demographics project a declining working population. As an aside, the lack of productivity growth isn't exactly news. I've been seeing articles about this phenomenon for at least a few years as the numbers from the 2008 recovery started to firm up. I was hoping this article would add to the conversation, but it doesn't seem to have done so...
JamesBarney 10y ago
I don't think this theory has a lot of evidence for it. I'm not sure what needs to be destroyed to create Dishonored 2.
- gipp 10y ago
  The parent is certainly oversimplifying, but you're not looking very carefully if you can't see environmental effects there. The energy expenses alone -- of the computers of developers, other staff of the company, and players; of whatever cloud resources are used by the company directly or through 3rd party services they take advantage of; of the office itself and of the transportation of employees to and from it -- are pretty huge. Not to mention the resources extracted to build the computers and other equipment used by the creators and consumers. They aren't used exclusively because of Dishonored 2, but it's an enormous ecological burden shared by all economic activity involving computers. You could keep going.

marcosdumay 10y ago

And notice that this ongoing decline in productivity is completely incompatible with that "the robots are taking all the jobs" line. What means, either that measurement is wrong, or current unemployment levels are not caused by automation. Of course, that does not mean that the robots won't take all the jobs on the near future. Just that they didn't do it already.

tonyedgecombe 10y ago
If automation pushes people out of high paying jobs into low paying jobs then it will result in lower productivity.
- marcosdumay 10y ago
  In that case, the measurement is wrong. I didn't dig deep enough on it to make my mind, and there are plenty of reasons to think it's flawed.
freehunter 10y ago
Or that robots are taking jobs at the same rate humans are leaving the workforce. Baby boomers are retiring and automation is increasing, so if they're at the same rate, unemployment wouldn't necessarily go up. However the more likely answer is that the measurement is wrong.
- zzalpha 10y ago
  Actually, in that case you'd still see an increase in productivity (e.g. GDP / hours worked) as workforce participation declines while GDP remains static.
pierrebai 10y ago
Another explanation is that robots are replacing low-paid jobs that were marginal cost in a product. I'd expect automating fabrication in the far-east (where wages are low) would fit this description. So the cost savings, and thus productivity gains, are marginal.

qwrusz 10y ago

A bit frustrating to see these outdated ideas and old ways of thinking continue to generate headlines. Total Factor Productivity (TFP) is a made-up best-guess legacy issue based on mathematical remainders/residuals/error terms from miscalculations of mis-measurements. Productivity and technology are real things and important, but they were appropriated incorrectly a long time ago and contemporary economics has moved on to try to be much more precise and careful in discussing such things. A similar, somewhat controversial example of a "distraction when math tries to becomes words" can be seen in the news when it comes to discrimination. Studies of sociodemographic differences and income levels, after controlling for education and IQ and experience etc., find differences in pay between men and women and between different minorities. The unexplained remainders for differences in income got called discrimination. Discrimination is a real thing and a real problem and must be addressed. But the reasons for differences in pay is not entirely due to discrimination, it's clearly much more complicated than that, studies that show this complexity are only recently getting attention. Lumping and labeling a problem as one big thing ("technology", "discrimination") that's easy to explain to a layperson but when it's really much more complex and the problem still largely misunderstood is a disservice to everyone.

roymurdock 10y ago
What's a better way to measure the impact of technological infrastructure on the economy than imputing TFP? Interested to hear how technology and productivity are discussed in state of the art economics, as I find TFP a very useful concept and measurement.
- qwrusz 10y ago
  I'm not sure how to answer within the scope of this thread, but a short answer is: the better way to measure the impact of technology infrastructure on the economy is to measure the impact of technology infrastructure on the economy. How this works: Pick a technology, go study its real impact in the real world, repeat. TFP does not do that. It doesn't measure anything. TFP is a residual from theoretical economics, not empirics, often styled in a form of Y=AKL. We don't know how (or at least can't agree how) to measure K or L accurately, more importantly we don't even know what A is or what it contains. I am not surprised you find TFP useful. It's a Nobel Prize winning idea. And I respect the thinking behind it. But it has since been kindly debunked by the real world. Many people find prayer or homeopathic medicine useful and practice them daily, this doesn't mean those things are working how people think they are or at all. I don't mean to punt an answer here but Wikipedia explains the problems with TFP better than I. Follow the links through the Cambridge Critiques as a start: https://en.wikipedia.org/wiki/Total_factor_productivity https://en.wikipedia.org/wiki/Total_factor_productivity

nickbauman 10y ago

Anyone notice that the end of productivity gains correspond to the end of Moore's Law (at least at the singe core level)? Coincidence?

sergiosgc 10y ago
Moore's law has not ended (yet). Transistor count is still following an exponential curve.
- nickbauman 10y ago
  True in theory the transistor count increases the performance, but in practice while the transistor count has increased, the performance has leveled off at around this time. https://www.lordabbett.com/content/dam/lordabbett/en/images/articles/chart2/CHART-Moore's%20Law%20on%20Trial%20Chart-11.11.2015.png https://www.lordabbett.com/content/dam/lordabbett/en/images/...

jwildeboer 10y ago

The amount of time wasted by humans trying to access paywalled articles might be quite a factor. #sarcasm

petra 10y ago

A layman's theory: First: total_factor_productivity = price_of_output/(0.7labor_cost + 0.3capital_cost) Let's say we're in a state of ideal competition - the minute some company improves productivity , which leads to reducing the input costs they put into the process by X% , other companies copy that process, which lead to the price going down by X%. And on the other hand, companies insulated from competition usually don't grow their productivity. So maybe the economy has many more of those 2 types of companies and that's mirrored in the economic statistics ?

philipkglass 10y ago

Naive question from someone who never took economics courses: Could some of the "missing" productivity come from measuring productivity in units of money instead of physical units? Sectors with highly competitive markets can rapidly increase real-product output but then see most of the dollar-gains erased by competition. For example, you could look at solar PV where last year the industry set a record of 70 gigawatts-peak of modules installed. The price competition is so fierce that manufacturer revenue has barely budged over 2012, when only ~30 GWp were installed, and actually declined from 2015. If an economist looks at this sector do they see spectacular productivity improvements like I see (far more watts, at lower prices, with real physical improvements up and down the supply chain), or do they consider productivity "missing" because the physical improvements aren't leading to revenue/profit growth? And if it's the latter, does that imply that economists only recognize productivity improvements when markets are imperfect enough that improved production technique delivers more money instead of fiercer competition? Is there no such thing as growing productivity (that would be recognized by mainstream economists) in a deflationary environment?

oli5679 10y ago
Productivity is measured in terms of a price index (the cost of a 'basket' of goods). There are some obvious challenges with defining this basket in practice, and it is plausible to argue that inflation is persistently overestimated and so actual productivity growth is higher than the reported figure. However, this could apply equally to previous time-periods. Just as modern generations benefit from superior electronics products and mobile network speeds, previous generations benefited from massive increases in the variety and freshness of food, or the household appliances that reduced the time cost of household chores. It could be that productivity growing at a rate that is both faster than measured but slower than trend? https://www.bls.gov/cpi/ https://www.bls.gov/cpi/
edblarney 10y ago
"rapidly increase real-product output but then see most of the dollar-gains erased by competition." What you mean to say is 'can we measure consumer surpluses' instead of 'producer surpluses' - i.e. profits. Indirectly - yes - this may be the root of the problem. When products improve in quantity and quality, but profits go down - we generally say the 'economy is shrinking'. But the value to consumer has gone up. We don't measure 'consumer surplus' i.e. the value captured by a consumer when they buy something. Essentially - you pay $1 for a pen. How much would that pen cost so that you felt 'it was not worth it'. Well, you might pay $100 for a pen, if you need to write sometime in your life. You'd probably treat it very well, but you'd still need to buy it. Maybe $500 is the real value of a pen. In this case - there is $499 'consumer surplus' every time a pen is bought for $1. (Again, not quite fair as you might buy several $1 pens whereas you'd only buy one for $500 - but you get the picture). The GDP is just the cost of everything sold in the economy + government spending. Which is a really bad measure if you think about it :)

Pamar 10y ago

I would like to add another possible way to interpret this. (caveat: I am suggesting stuff that I read in the blog of an Italian economist, I hope I am not misrepresenting him). What if Productivity was driven by demand? Do we "produce" stuff (or offer services) without any expectation to sell it to someone? If something is selling like hotcakes the producers of such item will do all they can to increase productivity, and competitors will try to create a similar product which either costs less or offers more features (or both) in order to capture the unfulfilled demand. Ok, assuming this is reasonable, what happens when demand, in general terms, starts to lag (due to a long economic stagnation/crisis)? (Another symptom that could help strenghten my argument: Hanjin built a large shipping fleet expecting to need it to ship stuff around and cope to increasing demand... and now: http://www.abc.net.au/news/2016-09-05/south-korean-shipping-collapse-leaves-freight-stranded/7814768 http://www.abc.net.au/news/2016-09-05/south-korean-shipping-... )

shae 10y ago

I'd argue we're still working for hours rather than accomplishments. I spent a few years self-employed, I would bid a money cost for an accomplishment based on how many hours it would require. If my bid was accepted, I was then immediately motivated to find a more efficient approach so I had more of both time and money. Every iteration of that approach improved my ability to accomplish tasks in smaller amounts of time.

rqebmm 10y ago

I'm not an economist, but one thing I've wondered is "how much productivity has been added since the 60s purely by adding women to the workforce"? Naively it would seem that almost doubling the available workforce would have large temporary effects on the economy until that became the norm. An alternative theory posed by one of my favorite economists[0] is that administration of public companies under the "maximize shareholder value" doctrine is finally coming home to roost. By prioritizing short-term profits in favor of long-term investment, companies have slowed their own growth for the last ~30 years. [0] http://www.goodreads.com/quotes/434485-running-the-company-for-the-shareholders-often-reduces-its-long-term http://www.goodreads.com/quotes/434485-running-the-company-f...

AtomicOrbital 10y ago
`by adding women to the workforce` the family is exposed to twice the chance of a breadwinner loosing their job, increased cost due to childcare/a 2nd car ... also both partners working too often results in greater appetite for debt - these risks are avoidable yet human nature tends otherwise

acegopher 10y ago

Globally there has been a lot of wage stagnation at the worker level. Anecdotally, a lot of folks in my social circle have traded working hours for salary. They used to work 50-60 hours for the same salary they are working 40 hours for now. Or perhaps there is less hope or belief that working hard will result in getting ahead. With most of the gains post-crisis going to the top and income inequality growing, perhaps there is less worker incentive to work hard.